Protecting Retirement Wealth: A Survey of Australian Products
16 Pages Posted: 18 Jan 2016 Last revised: 1 Apr 2016
Date Written: March 31, 2016
We survey the long-term derivative instruments (warrants) offered by Australian institutions to elderly Australian investors. Our focus is on products other than plain-vanilla life annuities. There are currently four active products. They incorporate a strike price which is either constant or eligible for periodic upward resets. The guarantee terms vary in length from 5 years to the lifetime of a second person. The products typically have hybrid European-American features, as early exercise is typically permissible yet subject to penalties. Benefits are mostly lump-sum but can be income streams. Fees are typically expressed as a percentage of some combination of the initial investment and the current balance.
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